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Practical Manual of Companies 2020.

Reduction due to compulsory endowment to the mandatory reserve fund (art. 16.5 Law 20/1990)

article 58.1 of Law 27/1999 establishes that, of the surpluses accounted for the determination of the cooperative result , once the losses of any nature of previous years and before the consideration of the Corporate Tax, will be allocated to the mandatory Reserve Fund , at least 20 percent .

article 58.2 of Law 27/199 9 establishes that of the extra-cooperative and extraordinary profits, once losses of any nature from previous years have been deducted and before consideration of the Corporate Tax, will be allocated to the mandatory Reserve Fund, at least 50 percent.

For the purposes of liquidation, according to the provisions of article 16.5 of Law 20/1990, to obtain the tax base corresponding to one or another type of results that must be subject to tax , will be reduced by 50 percent of the part of the same that is obligatorily allocated to the Mandatory Reserve Fund.

Therefore, accounting the legal mandatory allocation to the Mandatory Reserve Fund of 20 percent must be made based on the surpluses recorded from the cooperative result , once losses from previous years have been deducted and before considering Corporate Income Tax. For extra-cooperative results must be carried out in the same way, but taking into account that the legal mandatory allocation to this Mandatory Fund is 50 percent.

Fiscally, cooperative societies will have to reduce the taxable base corresponding to the cooperative result and the non-cooperative result in 50 percent of the part of the same that has been obligatorily allocated to the Mandatory Reserve Fund (that is, 20 percent in the case of cooperative results and 50 percent , in that of extra-cooperatives).

This reduction must be made through negative extra-accounting adjustments , entering in box [C9] , 50 percent of the part of the cooperative results that, It is obligatory to be allocated to the Mandatory Reserve Fund. The same procedure will be followed with box [E9] corresponding to the extra-cooperative results.

Keep in mind:

boxes [C9] and [E9] have correlation with box [00400] «Cooperatives: Mandatory reserve fund (Law 20/1990)» on page 13 of form 200, in such a way that the sum of the amounts entered in boxes [C9] and [E9] will be transferred to box [00400].